Stanza 3 Summary

Get out the microscope, because we’re going through this poem line-by-line.

By the lakes that thus outspread
Their lone waters, lone and dead,—
Their sad waters, sad and chilly
With the snows of the lolling lily,—

This chunk mostly repeats what we've just heard: the cold lakes, the sad and lonely water, and the snow.
Poe likes to repeat words and phrases to emphasize a certain sound and to create a rhythm. Here he's almost like a hypnotist, lulling us into a trance with these quiet images of a strange, sad world.

By the mountains— near the river
Murmuring lowly, murmuring ever,—

The speaker continues to recap what we have heard about already, taking us back to the mountains.
Then, he weaves in a new character – a river that murmurs quietly and endlessly.
Everything in this dream world has a personality. The landscape is full of feeling and energy.

By the grey woods,— by the swamp

Can you feel the focus shifting and sliding here? We're entering a new part of this strange world.
Again, think about the way a dream moves. You can just slip from one place to the next, without quite knowing how you did it. We were by the river, but now we're headed past the grey woods (yep, another sad, lonely place) and into the swamp. We know this can't be good, because swamps are mucky and grim – not a place we'd want to hang out.

Where the toad and the newt encamp—
By the dismal tarns and pools

Now we're really sinking into the swamp, which is full of slimy creatures.
The speaker mentions that toads and newts (little slippery salamander-like critters) "encamp" in this swamp (that just means they hang out there). Those two animals help to build an oozy, creepy mood. They sound like the kind of things a witch would put in her potion. We can imagine them wriggling around in the "dismal tarns" (little ponds) and pools.
See the picture he's painting? In just a couple of lines he's put us deep in a gross swamp, full of stagnant water and slimy little creatures.